Spill Litigation and Settlements

The Oil Pollution Act of 1990 passed both houses of Congress by large margins and was signed into law by President George H.W. Bush in response to the Exxon Valdez spill in Prince William Sound, Alaska. It mandates detailed clean-up plans from oil companies and requires monies to be set aside for dealing with potential spills. The requisite funds under this statute formed the basis for the remedies sought by the hundreds of lawsuits filed against British Petroleum over the spill.

BP settled criminal proceedings by entering a guilty plea with the US Department of Justice on January 29, 2013 to 14 criminal counts. The plea deal involved $4 billion in fines and was the largest criminal settlement in US history until the $13 billion settlement by JPMorgan Chase & Co. in November of 2013. The guilty plea with the DOJ involved 11 counts of felony manslaughter for those whom died on the rig. The company also pled guilty to a count of felony obstruction of Congress, a count of violating the Clean Water Act and a count of violating the Migratory Bird Treaty Act. BP set aside $42.7 billion, or about 20% of its 2013 revenue of $242.55 billion for dealing with the aftermath of the Deep Water Horizon Oil Spill, including litigation and settlement costs. It potentially faces an additional $17 billion in fines under the Clean Water Act. The company settled with most private lawsuit plaintiffs in March 2012 before civil trial.

Settlements providing for both property and economic loss and for personal injury authorized by US District Judge Carl Barbier in New Orleans on December 24, 2013 were upheld by the US Court of Appeals for the Fifth Circuit in January 2014. In March 2014, the economic and property damage claims settlement was held by the circuit court not to require claimants to show causation between their loss and the spill. That provision allows for fishermen, farmers, the tourism industry, restaurants, beach towns, hunters and others to collect for lost profits. The Fifth Circuit's ruling ended a temporary injunction of payments that began in December 2013. BP sought a removal of the district court judgment on the grounds of alleged false claims by businesses whose operations were not affected by the spill and exaggerated claims. The basis for fear of fraudulent claims stems from the complications of calculating economic losses that trail the depressed post-Hurricane Katrina era. Establishing a standard to figure out how much past and projected loss if any was caused by the Deep Water Horizon Spill and not Katrina or other intangible factors was a difficult task. BP alleged the terms of their $9.2 billion class action settlement agreement would allow claimants who have not been affected by the spill to collect money.

The entire Gulf Region felt economic fallout from the spill and a vast number of people were affected either directly or indirectly. BP alleged that some of the claimants are fraudulent not because they were not affected in some manner by the spill, but because they do not properly fit into one of the settlement classes. There also existed a point of contention in the fact that the appeals extended claims deadlines, which gave people more time to file. The circuit judges appeared only to look to the terms of the settlement agreement in making their decision. The court held that there are no provisions under the agreement requiring claimants to show a causal relationship between their claims and the spill. The circuit court pointed out the settlement was entered into by BP voluntarily and approved by the district court. A BP spokesman said the company would consider an appeal of the March 2014 ruling, though it was already appealing the ruling from two months earlier.